Tuesday, September 13, 2005

The Coming Corporacy: Part II

Originally formed in 1885, American Telephone & Telegraph—AT&T coins itself these days as the “world’s networking company.” In over 100 years of operation they have established themselves as a company that is highly aggressive in their practices to the point where the federal government decided that they were too large.

As early as 1949 the U.S. Government sued AT&T for monopolistic practices regarding their capitalization of technologies produced by the famous Bell Labs. Their attempt for AT&T to divest Western Electric caused AT&T to stay out of the business of selling computers, among other things.

Although AT&T was able to escape a larger divestiture at the time, the nails in their coffin were finally sealed after the U.S. Department of Justice finally won an antitrust lawsuit in 1982, after 8 years in the courts. This caused the affectionately-known “Ma Bell” to spawn 7 “Baby Bell” Regional Bell Operating Companies. Technically, the local exchange service operations of AT&T were divested with the agreement that AT&T could go into the computer business—a reversal of the earlier 1949 lawsuit.

The resulting companies, sans the parent company AT&T:

  • Ameritech
  • Bell Atlantic
  • BellSouth Telecommunications
  • NYNEX
  • Pacific Telesis Group
  • Southwestern Bell Corporation
  • US West

(Note: AT&T also had investments in two independent companies: Cincinnati Bell and Southern New England Bell, or SNET)

Remember the list of babies created by the breakup of Standard Oil from earlier? Let’s go through and see what the disposition of the Regional Bells have been since the divestiture:

  1. Ameritech: Acquired by Bell Atlantic in 1997.
  2. Bell Atlantic: Merged with GTE in 2000 to form Verizon which, in turn, is currently in negotiations to purchase MCI.
  3. BellSouth: No changes.
  4. NYNEX: Acquired by Bell Atlantic in 1997.
  5. Pacific Telesis Group: Acquired by SBC Communications.
  6. US West: Acquired by Denver-based Qwest.
  7. Southwestern Bell Corporation: Changing its name to SBC Communications in 1998, SBC acquired 3 of the Baby Bells and has announced plans to purchase their parent company AT&T.

AT&T, through the 1990’s and until 2001, made several investments into media and VoIP (voice over IP) technologies. Running into debt issues, AT&T spun off AT&T Wireless in 2001 as (at the time) the largest IPO in history. Renowned for it’s business accounts, AT&T Wireless was acquired by Cingular Wireless (owned 60-40 by SBC and BellSouth, respectively), causing Cingular Wireless to become the largest wireless company in the world with over 50 million customers.

The trend that I want to point out is that, with the exception of Cincinnati Bell, the companies formed by the forced breakup of AT&T are larger and more successful than their parent. Compared with 2004 revenues of $30.5 billion; SBC alone reported revenues $40.7 billion for the same time period.

Regardless of government regulation and interference, market forces have ultimately created a handful of behemoths.

In the next post I will briefly discuss a final case study and delve further into the corpocracy form of government.

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